Travel law
A new direction for Travel Law (?)
With some delay, on April 12, 2023, the government submitted the bill amending the law of November 21, 2017 on package travel, linked travel arrangements and travel services (hereinafter: 'the Bill'). With the Bill, the government intends to tinker with the security that package travel organizers and retailers must provide for the reimbursement of travel funds in the event of their insolvency. It is the first time since its enactment that the Travel Act would be amended.
What came before
Travel law as we know it today originated at the European level, more specifically in Directive 2015/2302 of the European Parliament and the Council. The Belgian legislature transposed this directive in 2017 with the Law of November 21, 2017 ('Travel Act'). However, unlike what is the case for some of our neighboring countries, such as the Netherlands, the legislator also added provisions to those of the Directive. The Directive thus provides that 'Member States shall ensure that organizers established on their territory provide security for the reimbursement of all sums already paid by or on behalf of travelers to the extent that the services in question are not provided as a result of the insolvency of these organizers.' The Belgian legislator added, with the Royal Decree of May 29, 2018, that this 'security' had to be provided by means of an insurance contract entered into with an insurance company authorized for that purpose. A bank guarantee or a security with a foundation is not sufficient. The FPS Economy monitors this. The security that Belgian travel professionals must provide is thus subject to more conditions than those of their colleagues from our neighboring countries.
What Belgian legislators may not have predicted in 2018 is that during, but also after, the corona crisis, many insolvency insurers withdrew from the Belgian market. Today, only two insurers remain active, one of which expressed its intention to leave the market. What emerged is a quasi-monopoly. Package travel organizers and retailers ran into problems. Taking out insolvency insurance is required by law. Without insurance, no package travel sales. But are there still insurers willing to insure travel professionals? And on what terms?
What won’t change?
It seems to the authors of this text that the Belgian legislator did not took into account all consequences of adding to the provisions of the Directive that organizers and retailers must provide security through insolvency insurance. Indeed, this system of insolvency insurance proved difficult to work with in practice. The legislator could now have chosen to bend the rules again by only requiring organizers and retailers to provide security (no more than that). With this Bill, however, the legislator explicitly retains insolvency insurance as the only possible security. Moreover, where this requirement is now 'only' included in a Royal Decree, the Draft Bill aims to bring it into the Travel Act itself. Organizers and retailers of package travels still have to look for a suitable insolvency insurer every year.
What does change?
While little will change for the package travel organizer or retailer, the Bill may well cause a landslide in the landscape of insolvency insurers in our country.
The major novelty of the Bill is that in the event of the insolvency of an organizer or retailer based in Belgium, the insurance company can cap the total amount of compensation it must pay. Above that ceiling, the State will cover most of the intervention due.
Package travel organizers and retailers enter into an insurance contract with an insurance company. They pay premiums to the insurance company. The insurance company, in turn, pays annually 9.2% of the total premiums collected that year to the yet to be established 'Fund for State Intervention in the Insolvency Insurance of Travel Professionals.' This 'anticipatory contribution' will go into the Fund. Obviously, insolvency insurers will want to pass on this contribution to their policyholders.
The insurance company paying the anticipatory contribution may, per calendar year, limit the total amount of insurance services it must offer to travelers under the insolvency insurance to one hundred percent of the total collection of premiums and ancillary costs for the year in question associated with this insurance. For all amounts exceeding this ceiling, the Fund intervenes at a rate of 98%. On the part of the insurance company, the risk is so severely limited, up to 102% of the total collection of premiums and incidental expenses of the year in question. When things go thoroughly wrong, for example due to several major bankruptcies in the same year, the insurance company keeps its head above water.
It is important to note that insurance companies can only limit their risk when the bankrupt company is a Belgian organizer or retailer. Through their premiums, foreign companies do feed into the Fund, but their insurer gets nothing in return. This will obviously have repercussions on the conditions under which insolvency insurers will want to insure the activities of foreign organizers and retailers on the Belgian market. The Bill thus benefits only the Belgian travel professional. Part of the market risks remaining difficult to insure.
What will change for you?
The Bill is twofold. Where at the beginning of the text consumer protection still figures as the highest goal, it is clear from the remainder of the text that the main aim of the Bill is to keep the travel sector insurable. Critical voices would say that the legislature is now trying to eliminate the problems it created itself.
The main purpose of the bill is to attract more insurers to the Belgian market, with the hope that Belgian package travel organizers and retailers will find it easier to obtain insolvency insurance and pay less for it. If the Bill achieves its goal, this is only good news for travel professionals' peace of mind and wallets. Established insolvency insurers will face more competition. In any case, the Bill has no intention of waiting. If the change in the law will actually happen, it will operate retroactively from Jan. 1, 2023, and -you heard correctly- will apply to policies already in place. To be continued...
As an organizer or retailer of package tours, do you have questions about your (insolvency) insurance? Are you as an insurer already active on the Belgian market or are you considering setting your sights on this market? The lawyers at Nelissen Grade will advise and assist you in all aspects of Travel Law.